What’s new and next in German regulation?

These days the German politicians at a federal and state level get a lot of well-deserved credit from all around the world on how they’ve managed the Covid-19 crisis. In the past, they’ve received a lot of credit, at least from most parts of the world, for how they handled the refugee crisis in 2015. The usually well-functioning cooperation between political leaders on federal and state level has provided for a stable political environment, which most likely is one major factor for the long term, sustainable economic growth that Germany has experienced for many years.

Yet, given this success story, why does it seem so difficult for these obviously smart politicians to come up with a workable solution for a gaming regulation? The never-ending story about Germany and its attempt to create a legally reliable gaming constitution has raged on for the last 20 years. At the beginning of this year there appeared to be light at the end of the tunnel with the emergence of a clear plan in place to apply for temporary sports betting licences to bridge the gap until middle of 2021, when the new and supposedly comprehensive all new gambling legislation should be introduced. Under the short and catchy German name ‘Glücksspieländerungsstaatsvertrag’ the goal was to finally come up with a compromise, that aimed to combine the requirements of the major stakeholders (states/gaming industry/consumers), while at the same time being workable and not violating European law.

Maybe this kind of compromise is just too difficult to achieve? Compromises are the basis of any democracy and especially in Germany, compromises have led to many successful and sustainable political decisions. The character of a compromise is that no party gets 100% of its will. The art of the compromise is to make sure all parties still have something to be happy about, so they do not attack the compromise when it moves away from what they initially lobbied for and it becomes more politically expedient to challenge it. Most importantly, it must also be beneficial and practicable for the people living with the regulations and be legally in line with European law.

A medium sized and landscape wise beautiful state in the far North of Germany (Schleswig-Holstein) has shown this kind of compromise is doable and so far is the only state in German history that was able to establish a functional gambling licensing system approved by European law. When faced with this success, some would inevitably ask, if you already have a proven concept up and running in the country, why not simply copy that? Well, that would be too easy…The different stakeholders, either directly or indirectly involved in this compromise finding process are not all on the same page, and this does not refer to the differing goals of both politicians and the gaming industry but other factors. The temporary licence applications and the new interstate treaty reflect a compromise of 16 different states, which had to meet somewhere in the middle between “let’s go back to monopoly in sports betting and prohibit everything else” and the “Schleswig-Holstein model” of fully licensing sports betting, casino and poker games. At the time and over time, the responsible government in Schleswig-Holstein had been heavily criticised and pressured by several other state governments for this step.

Trying to find a compromise

The truth is that there also have been differing interests within the gaming industry. In fact, there are at least four different interest groups (representing sports betting providers, combined sports betting and casino providers, casino industry, vending industry) trying to pitch their interests to the relevant politicians. Some of the interest groups have far different priorities than others, which does not make finding a workable compromise easier.

To continue the fight against providers, the Lower Saxony Ministry of Interior keeps increasing the pressure on payment providers, even though those would have to massively violate data protection requirements to fulfill this. So basically, German politicians are pressuring third parties to break GDPR (as payment providers would have to identify what the payments are used for and especially if the customer is based in Schleswig-Holstein or not) in order to execute what they are not able to do because they have not been able to create the legal boundaries for this in the last 20 years. On top of this, the Lower Saxony authority is mainly hunting online casino providers, despite the fact those games are supposed to be fully licensed and regulated in about a year from now.

Where are we right now? The current application process for temporary sports betting licences has been suspended by the latest ruling of the administrative court in Darmstadt (Hesse), mainly due to a lack of transparency of the whole process. There is a chance the weaknesses in the process can be addressed and then the application process could continue. However, the more interesting part will be if the new interstate gambling law, supposed to be introduced on 1 July 2021, will hold up against any legal challenges. The compromise among the states resulted in a draft, which includes several difficult pain points for the industry, which appear too painful to not think about another challenge in court. Legal experts say the compromise contains various opportunities to attack the masterpiece with a good chance to be successful in the German or European court.

That of course would mean we will keep on waiting for the real German licensing masterpiece, the new one outside of Schleswig-Holstein of course. It also means we will keep reading articles with headlines like “what’s next in German gambling regulation”! To be continued…

Author, Rainer Lauffs, COO B90 Holdings plc

Rainer is a German business graduate, who has provided consulting services to smaller and larger international companies in the gaming industry since 2006. Since 2018 he also also served as chief operating officer (COO) of B90 Holdings PLC.